VLSI Technology Reports Operating Results for 1996 Fiscal Third Quarter
SAN JOSE, Calif. — October 14, 1996 — VLSI Technology, Inc. (NASDAQ: VLSI) today reported operating results for the third quarter of fiscal 1996. Revenues for the third quarter were $ 183.0 million, as compared to $ 188.2 million in the third quarter of 1995 and $ 182.5 million in the second quarter of 1996.
Net income for the third quarter, which included the resolution of certain patent matters with IBM, was $ 2.6 million, down from $ 16.2 million for the third quarter of 1995. Earnings per share for the third quarter were $ 0.06, down from $ 0.35 for the corresponding quarter a year ago. Net income for the second quarter of 1996 was $ 8.3 million, or $ 0.18 per share.
Revenue for the first nine months of fiscal 1996 totaled $ 533.2 million, compared to $ 535.6 million for the first nine months of fiscal 1995. Net income for the first nine months of 1996 was $ 14.1 million, or $ 0.30 per share compared to $ 27.7 million, or $ 0.66 per share for the prior year.
"Third quarter revenues reflect a profound transition at VLSI. Over the past year, our communications and consumer digital entertainment products have grown from approximately one third to two thirds of total revenues. Core logic (x86 chipsets) revenues are now less than ten percent of our company's total revenues," said Alfred J. Stein, chairman and CEO, VLSI Technology, Inc. "Earnings per share were driven by improved manufacturing yields and efficiencies at our San Antonio wafer fabrication plant. At our San Jose fab, loadings continue to have a negative impact on profitability."
"In the month since joining VLSI, I have become ever more excited about the company. From my previous experience in the communications industry, it appears to me that VLSI is superbly positioned in the rapidly growing GSM and DECT markets," said Richard M. Beyer, newly appointed president and chief operating officer, VLSI Technology, Inc.
VLSI's wireless segment saw record levels in both bookings and revenues. We, along with industry analysts, expect the non-United States wireless subscriber base to continue to be the largest market segment. Almost two thirds of the market is, and will continue to be, outside the United States, with almost half that total expected to move to GSM handsets by the year 2000, up from only 16 percent in 1995. During the quarter, VLSI saw increased GSM device shipments to Ericsson and Matsushita and the expansion of DECT shipments. In addition, the company saw an increase in shipments to UK-based Ionica PLC for a radio local loop (RLL) application and the company won a key design for a CDMA-based cellular telephone.
In the consumer and entertainment markets, VLSI saw heightened activity. Product announcements during the quarter were highlighted by the introduction of VISTA(TM) (VLSI's Integrated Set-top Architecture). This product family provides a full range of components necessary to enable the implementation of a highly integrated and cost effective set-top box. The VISTA API provides a software program that we believe can accelerate a manufacturer's set-top software development. Notable VISTA related announcements include a single-chip MPEG2 audio/video decoder and a field programmable DVB (Digital Video Broadcasting)-compliant MPEG2 transport device.
These parts were key reasons for VLSI being selected as a primary silicon supplier for Canal+, a pay TV service in France where VLSI is designed into four out of five Canal + DVB set-top box providers' systems. Also, VLSI announced a design win from Sony for its set-top boxes — used in both Japan's PerfecTV! and Canal+ digital satellite services. VLSI now has design wins in leading satellite TV services worldwide including DirectTV, USSB, Canal+, PerfecTV!, and STAR-TV.
During the quarter, VLSI announced an agreement to license Hitachi's SuperH(TM) RISC engine (SH) 32-bit microprocessors for incorporation in VLSI's libraries of system-level integration functional system blocks(TM) (FSB) giving VLSI access to the Hitachi SH-3 and forthcoming SH-4 engine implementations. Applications for this technology include digital entertainment and handheld computing devices. The SuperH(TM) RISC engine has been selected as a platform for Microsoft's Windows CE program. "Japan has become an important marketplace for VLSI because of our consumer wireless and entertainment focus," said Alfred J. Stein. "The availability of the SH should extend VLSI's reach in Japan and strengthen our ten year cooperation with Hitachi."
In September, the Court of Appeals for the Federal Circuit denied Texas Instrument's petition for rehearing on the Court's previous ruling against Texas Instruments on patent infringement claims pending against the company and two other companies since 1990. The time period for Texas Instruments to file its final appeal to the U.S. Supreme Court expires in late December. The company has retained the litigation reserve originally established in the second quarter of 1995 in the amount of $ 19.4 million, net of litigation expenditures incurred, pending resolution of this and other intellectual property matters.
During the quarter, the company concluded a patent licensing agreement with IBM. As a result of the agreement, the company has taken a charge against earnings for $ 7.5 million for a release of alleged infringement claims prior to 1996. The company will also pay an on-going royalty for periods after January 1, 1996 through the term of the agreement in amounts not considered material to the results of any one quarter, but the company has recorded a charge to cost of sales in the third quarter for the first, second and third quarter 1996 liability.
Certain matters discussed in this news release are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include: slowing growth in the demand for semiconductors; success in implementing cost reduction programs; lower factory utilization and excess capacity; pending litigation; customer concentration; product pricing pressures and the impact of competitive forces; and other risk factors listed from time to time in the company's SEC reports, including but not limited to the report on Form 10-K for the year ended December 29, 1995, and Form 10-Q's for the quarters ended March 29, 1996, and June 28, 1996 respectively.
About VLSI Technology, Inc.
VLSI Technology, Inc. designs and manufactures System-Level Silicon(TM) solutions based on its FSB functional system blocks(TM) library. Targeting its offerings toward the communications, consumer digital entertainment, and computing markets, the company offers its customers advanced system-level integration capabilities. The company is based in San Jose, California, with 1995 revenues of $ 720 million, and approximately 3,000 employees worldwide. Visit VLSI's homepage at http://www.vlsi.com.
Note to Editors: FSB, functional system blocks, VISTA and System-Level Silicon are trademarks of VLSI Technology, Inc. All other brand or product names are trademarks and/or registered trademarks of their respective owners.
VLSI TECHNOLOGY, INC.
Summary Consolidated Financial Statements
(Thousands except per share amounts)
Three months ended Nine months ended
Sept. 27, Sept. 29, Sept. 27, Sept. 29,
CONSOLIDATED STATEMENT OF 1996 1995 1996 1995
INCOME (Unaudited)
Net Revenues $ 182,959 $ 188,184 $ 533,197 $ 535,608
Cost of sales 109,478 113,069 325,827 321,836
Gross Profit 73,481 75,115 207,370 213,772
Research and development 27,064 22,740 77,044 65,676
Marketing, general and
administrative 33,798 31,886 102,856 90,820
Operating income 12,619 20,489 27,470 57,276
Patent matters (7,500) – (7,500) (19,400)
Interest income (expense),
net (1,361) 2,588 131 1,696
Income before taxes 3,758 23,077 20,101 39,572
Provision for taxes
on income 1,125 6,920 6,025 11,870
Net income $ 2,633 $ 16,157 $ 14,076 $ 27,702
Net income per share $ .06 $ .35 $ .30 $ .66
Weighted average common
and common equivalent
shares outstanding 46,962 46,729 46,745 42,209
Sept. 27, Dec. 29,
1996 1995
CONSOLIDATED BALANCE SHEET (Unaudited)
Current assets:
Cash and cash equivalents $ 154,439 $ 183,165
Liquid investments 28,794 182,416
Accounts receivable 116,833 119,638
Inventories 62,417 60,848
Deferred and refundable income taxes 43,388 47,706
Other current assets 6,939 4,362
Total current assets 412,810 598,135
Property, plant and equipment, net 489,614 352,041
Other assets 11,709 9,711
Total assets $ 914,133 $ 959,887
Current liabilities:
Accounts payable, accrued taxes,
liabilities and deferred income $ 157,475 $ 188,878
Short-term debt and current
obligations under capital leases 8,615 9,160
Total current liabilities 166,090 198,038
Non-current obligations under
capital leases 2,636 3,465
Long-term debt 209,633 215,382
Non-current deferred income taxes 12,373 12,373
Stockholders' equity 523,401 530,629
Total liabilities and
stockholders' equity $ 914,133 $ 959,887
CONTACT:
VLSI Technology, Inc.
Gregory K. Hinckley, 408/434-7836
Greg Kaufman, 408/434-3070